The private equity firm detailed plans to pump the money into fledgling firms that make products and services for marijuana patients and recreational users, bringing some much-needed investment dollars to a funding-starved industry.

Brendan Kennedy, chief executive officer of Privateer, spoke with MMJ Business Daily recently about the fundraising process, how the investment climate has changed over the past year and the characteristics of cannabis investors.

Question: How long did it take you to raise the money, and how difficult was it?

Answer: We started thinking about it 18 months ago, and we put a structure in place to raise money at that time. It really occurred in two phases. We had half-a-dozen people invest early on who were dying to find an opportunity like this. But the bulk of our investors – I would say between 80-90% – have joined in the past six months.

Q:Is that a reflection of increased efforts on your part to raise money, or a change in the overall climate?

A: We spent a year looking for a needle in a haystack, but after the election on Nov. 6, people started looking for us. It made all of this a heck of a lot easier. So, yes, there was a big change in the climate, in the environment, and what we find now is that more mainstream investors see the inevitability of this and want to get involved. It was really hard (to raise money) a year ago, but that has changed.

We actually have access to a lot more capital when we need it. We’ll do a larger round sooner rather than later, and it certainly won’t be for less than $25 million. We’ve had excess demand from investors, so we will give all of the investors that couldn’t get involved in this round the opportunity to participate in the next round.

Q:What types of investors are placing bets on the cannabis industry these days?

A: Our investors come from the far left and the far right politically, progressive democrats and libertarian republicans. If you put them all in a room they wouldn’t agree on anything except for this. We’ve got tech entrepreneurs from Silicon Valley and ranchers from the Midwest and oil people from Texas and investment bankers from New York. And we’ve got a group of international billionaires motivated to end cannabis prohibition. They believe in Privateer Holdings’ ability to elevate the conversation about cannabis and build mainstream brands.

Q: So would you say, as a whole, that the investors you work with are more interested in financial returns or social change?

A: It’s definitely a mix of both. Most of our investors are looking for a financial return, but they are all looking for a social return that’s measured by ending the harm caused by prohibition. Having said that, the largest financial returns to investors will result directly from ending cannabis prohibition, so the two go hand-in-hand. It’s not just a typical investment – it’s also using business as a form of activism. It’s our job to change the conversation about cannabis and move beyond the ubiquitous clichés of the industry. I will also say that none of our investors are currently in this industry.

Q. Are there any differences between traditional investors and the people interested in funding cannabis companies?

A. There are some unique characteristics of investors in this industry. This is not a short-term play to them – they are in it for the long haul. We structured Privateer to give ourselves as much time as needed. We are trying to end something that’s been around for 75 years, and it’s going to take time and patience. Our investors have that, which is somewhat unusual, though that doesn’t mean they are not interested in a financial return.

Q. From a geographical standpoint, where are the best investment opportunities?

A. I can tell you that we are all over the place. We are looking at deals in lots of different states. I’ve been to 400-500 dispensaries in all the medical cannabis states that have them. I’ve been to dispensaries in Canada, and recently I was in one in Israel. We’re not looking just in one specific state or even just in the US. We’re looking around the world. There are opportunities everywhere.

3 comments on “6 Questions for Privateer Holdings CEO Brendan Kennedy on the Current Investment Climate”

Moving marijuana out of federal schedule I will be huge in making marijuana business viable. A friend Carl Olsen of Iowians for Medical Marijuana is currently the Intervenor in the ASA vs DEA rescheduling case. Carls argument is different from ASA. He is saying that since 20 states have accepted medical marijuana that it no longer meets the federal schedule I criteria of no medical use in the United States. Both ASA and Carl are currently seeking cert in the U.S. Supreme Ct. For more info on this contact me a [email protected]